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Secondary Capital Markets, Long-Run Growth, and the Term Structure of Asset Yields

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  • Bencivenga, Valerie R
  • Smith, Bruce D
  • Starr, Ross M

Abstract

An endogenous growth model is presented in which production uses a vector of capital inputs. Technologies for creating capital of different types vary by gestation period and productivity. Ownership of gestating capital must be "rolled over" in secondary capital markets in which transactions are costly. We study how reductions in transactions costs affect the equilibrium growth rate, the rate of return on saving, the volume of activity in secondary capital markets, and the term structure of asset yields. We give conditions under which reductions in transactions costs result in higher or lower growth rates. Copyright 2000 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Bencivenga, Valerie R & Smith, Bruce D & Starr, Ross M, 2000. "Secondary Capital Markets, Long-Run Growth, and the Term Structure of Asset Yields," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(3), pages 769-800, August.
    • Handle: RePEc:ier:iecrev:v:41:y:2000:i:3:p:769-800
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    Cited by:

    1. Uras, R.B., 2014. "Financial Development, Long-Term Finance and the Macroeconomy : The Role of Secondary Markets," Other publications TiSEM e986496f-6d03-4372-aa73-7, Tilburg University, School of Economics and Management.
    2. Uras, Burak R., 2019. "Unbundling Financial Imperfections: Lending Frictions Vs. Trading Frictions," Macroeconomic Dynamics, Cambridge University Press, vol. 23(4), pages 1401-1441, June.
    3. Uras, Burak R., 2020. "Finance and development: Rethinking the role of financial transparency," Journal of Banking & Finance, Elsevier, vol. 111(C).

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